by: Giselle C. Alexander, J.D., LL.M., C.P.A.
For nearly two decades taxpayers owed a tax refund from the government of Guam faced uncertainty as to the timing of their refund. While some taxpayers received an effortless prompt refund, other taxpayers faced years-long periods of waiting and pleading before receiving their refunds.
In April 2011, frustrated taxpayers filed a lawsuit, Paeste et al. v. GovGuam et al., against the government of Guam alleging violation of U.S. law by failure to timely pay refunds of taxpayers’ overpayments of Guam Territorial Income Tax and by improperly treating refund requests unequally. On August 21, 2012, the District Court of Guam granted the plaintiff-taxpayers’ motion for summary judgment and awarded substantial attorney’s fees and costs. In January 2013, District Court Judge Consuelo Marshall went on to issue a permanent injunction ordering the government of Guam to pay most tax refunds no later than six months from the tax return due date. The government of Guam was not particularly enthused about this order and appealed to the U.S. Ninth Circuit Court of Appeals.
On August 26, 2015, a unanimous panel of the U.S. Ninth Circuit Court of Appeals affirmed the District Court’s summary judgment that the government of Guam violated U.S. law by failure to timely pay income tax refunds and by its “starkly unequal treatment of refund requests”. The award of attorney’s fees and costs was also affirmed. The injunction ordering Guam to pay most tax refunds within six months from the tax return due date was also upheld. The government of Guam was again not particularly enthused about this order. However, within weeks of the 9th Circuit’s decision, Governor Calvo announced the release of $54.5 million in tax refunds. As of September 30, 2015, approximately $15.7 million was still owed to taxpayers, with some refunds dating back to 1995 tax returns.
Although paying a significant amount of the back tax refunds owed, Guam wasn’t ready to give up that easily. On December 22, 2015, the government of Guam filed an emergency application with the U.S. Supreme Court, seeking to continue a stay on the order to pay attorney’s fees while Guam considered further appeal. On January 8, 2016, Guam’s application was denied. But Guam isn’t giving up – on February 1st, Governor Calvo’s office filed its petition for appeal of the 9th Circuit’s decision to the U.S. Supreme Court. The plaintiff-taxpayers have 30 days to file opposition. Stay tuned for further updates on Guam’s tax refund litigation!
If you are suffering from a refund delay, whether it’s from Guam or some other U.S. state, territory, or the I.R.S., consult a tax professional for advice. Contact DWK Tax Law today.